IBUS6020 Enterprise Management in China
Final group report
Lun Zheng 500431014
Stefi Palaganas 490508480
Jiawei Xu 510377454
Yongjian Shen 510344641
Tea Henglay 500645530
June 4, 2021
1. INTRODUCTION
Over the last decade, Chinese outbound foreign direct investment (ODI) has more
than quadrupled (Ministry of Commerce PRC, 2021). Many Chinese multinationals have
increasingly turned to foreign markets not primarily to gain access to new markets, but to
acquire the knowledge they require to thrive in their home country (Hendrischke, 2021). This
strategy helps explain their focus on acquisitions rather than organic growth.
Although there have been some unsuccessful attempts in pursuing this strategy, there
have also been some cases that have succeeded and paved the way to the next step: expansion
overseas. To this extent, this paper will analyze the case of Anta Sports (Anta), a leading
sportswear brand in China that has begun to grow outside of China, and the acquisition and
integration of Amer Sports, another giant in the sportswear industry. The analysis will mainly
focus on Amer's performance in the U.S. Market. More specifically, the researchers will
investigate: How does Amer Sports in the U.S. Market contribute to Anta’s strategy in
expanding overseas?
This report is analyzed from a Springboard perspective and is structured as follows:
first, Anta Sports will be analyzed in its domestic market in China, followed by reasons for
the company to spring in foreign markets. Thirdly, a discussion on Amer’s operations in the
U.S. market is presented and will conclude with the integration outcomes of the Anta-Amer
deal.
2. ANTA SPORTS IN DOMESTIC MARKET
A. COMPANY BACKGROUND
Anta Sports was founded in 1991, and in its earlier stages, it specialized in athletic
footwear and later branched out into sportswear. Anta has been primarily engaged in the
design, development, manufacturing, and marketing of branded sporting goods for many
years, providing consumers with products such as sports shoes, clothing, and accessories (安
踏体育用品有限公司, 2021).
In the 2000’s, Anta entered foreign markets including the European region and
Singapore through acquisitions. One of its most notable moves was the acquisition of the Fila
trademark in mainland China, Hong Kong and Macao, which currently takes up a large
portion of Anta’s total revenue. At this stage, the main focus of these acquisitions is to gain
reputational value from the high-end population inside major 1 tier cities in China. In these
operations, the company has gained some experience and capabilities dealing with
international companies prior to engaging in outbound FDI.
In 2019, it successfully acquired the Finnish sports brand group Amer Sports
Corporation (Anta website), a premium sporting goods brand with multiple brands under its
name. Unlike other acquisitions, the purpose of this deal is for Anta to go global and
challenge large brands like Nike or Adidas in the international market, starting from the USA.
Motivations regarding the Anta-Amer integration will be discussed further in the paper.
B. BUSINESS MODEL AND COMPETITIVE ADVANTAGES
Figure 1: Anta’s Business Model Canvas
In contrast to incumbent brands such as Nike and Adidas who choose to target
high-end customers, Anta’s target customer segment is the mass market. Anta’s value
proposition is unique since the cost performance that Anta’s products achieve is not attainable
to other companies in the same industry. From the perspective of the value chain, in the
upstream supply chain, Anta is playing its advantages in scale to obtain the best
price-performance ratio (Anta Sports Products Limited, 2020).
Anta is able to cut down costs and leverage economies of scale because of its
excellent R&D capabilities. Its R&D team is engaged in sports biomechanics, human
mechanics, kinematics, physiology, materials science and other scientific research fields. All
have in-depth layouts, and the R&D supervisors in each field have more than ten years of
experience (Anta Sports Products Limited, 2020).
Another competitive advantage of Anta in the domestic market is vertical integration.
The design, R&D, partial manufacturing, brand promotion, and sales of its main products are
all made by Anta, which shows that it covers almost the entire industry chain, evidenced in
Figure 1. This enables the company to gain more control of its supply chain and offer lower
prices, allowing Anta to cut costs and serve the mass market.
C.
REASONS ENCOURAGING ANTA TO SPRING AND FACILITATING
FORCES
While most sportswear companies rely solely on their own brand, Anta stands out with its
multi-brand strategy (Anta Sports Products Limited, 2020). The company was largely
dependent on the domestic market prior to the Amer Group acquisition, but with several
international brands now under the group's control, it can make larger forays into
international markets far greater than its Chinese competitors.
a. From market perspective
i.
Competitive rivalry in China: Moderate
Figure 2: Market share of major sportswear brands in China calculated by sales
From an economic and political perspective, reforms and trade interoperability had
promoted the expansion of Chinese companies in the world market (Hendrischke, 2021). At
the same time, the opening up of trade has incurred many well-known multinational brands,
such as Nike and Adidas, to flood into the Chinese domestic market. With the highly
regarded existing competitors capturing a big part of the market share, this serves as tough
competition for Anta to seize the captured market because the existing competitors are so
well established (Luo & Tang, 2007). The same goes with their consumer’s loyalty to their
products and brand as seen in Figure 2 (Annual reports).
As a consequence, Anta is investing overseas to counterattack the Nike and Adidas’
major foothold in the home country, aligning with the Springboard perspective (Luo & Tung,
2007). The old method of relying on imitation has gradually become impractical, and
acquiring an already operating company is much easier than starting new shoe technology
research and development from scratch ("LI-NING, ANTA, PEAK and 361: Chinese
Sportswear Brands", 2021). In the light of this, it is in Anta’s interests to not only operate
domestically, but also expand in foreign markets that have lesser competition to ensure
ongoing success.
ii.
Buyer Bargaining Power: Moderate
Although Anta’s largest customer only contributes to 4% of Anta’s total sales, the
emergence of new technologies and social media has lowered switching costs for consumers,
as seen in Appendix B (Anta Sports Products Limited, 2020). Through technology, customer
experience in retailing has become more seamless, and there is now a more comprehensive
selection of products for customers to choose from. This leads to little differentiation in
sportswear products, thus lower switching costs for buyers (Wee Sile, 2015). Investing in
foreign markets can help generate greater revenue and growth to counteract this threat in the
industry and improve Anta’s commercial value.
b. From institutional perspective
Regarding social factors, China’s huge population base has brought about exponential
growth in consumption power. People’s pursuit of international fashion trends has also
increased, making the Chinese market’s demand for commodity diversity increasing (Cheng,
2021). At the same time, the maintenance of property rights is also one of the legal factors for
Anta to expand overseas markets (DiMatteo, 2018). Statistics show that the shoe factories in
Jinjiang and Putian produce 80% of the shoes of the world's universities, and the number of
imitations might be more. If Anta wants to establish a good brand image and spread its sense
of authenticity, then expanding overseas in the future by opening factories could be an
effective way to break out this negative influence.
D. UNIQUE CHALLENGES
The springboard theory also talks about challenges. Anta could meet huge challenges
in building effective working relationships with previous Amer’s stakeholders, bringing
disparate corporate cultures together, and organizing globally dispersed complex supply
chains in order to integrate domestic and host country operations.
3. AMER SPORTS IN THE U.S. MARKET
The acquisition of Amer took place in 2019 for an amount of $ 4.6 billion. As
mentioned, this acquisition is different from the previous given that, while the aim of
precedent operations was gaining more competitiveness in the domestic market, this time
Anta wants to expand overseas. To this extent, Anta intends to run Amer Sports as a separate
entity, with its own board of directors.
The acquisition also helps Anta bypass stringent trade barriers in trade markets (Luo
& Tang, 2007). Anta's business in the U.S. market must not be carried out without the
influence of political factors because China and the United States are in a state of trade war
(Hsu, 2021). Compared with Anta's direct access to the U.S. market, Amer's business in the
U.S. has been less affected. As a result, Anta is able to reduce its tariff expenditure, decrease
its operating costs, and also increase its profit margin.
A. THE U.S. MARKET
a. Threat of new entrants: Moderate
Threat of new entrants is considered to be moderate in the sporting goods industry in
the U.S. market. The emergence of impactful technology, which the U.S. is particularly
advanced in, has led to an easier access for sporting goods new entrants to distribution
channels since products can be sold on the internet (Getzoff, 2020). This would lessen its
dependence on traditional distributors on carrying their products. However, this factor is
offset by the fact that product differentiation relating to brand equity poses a high barrier to
entry for new companies. In the case of Amer, its sub-brand, Wilson, has strong brand
recognition garnered from being the official sponsor of the Tennis U.S. open for more than 40
years and recruiting key athletes such as former world number one American tennis player,
Serena Williams (“Wilson”, n.d.). Thus, Amer has strong customer loyalty, offsetting
challenges from the threat of new entrants.
b. Threat of substitutes: low
The sports goods industry in the U.S market is characterized to have a low threat in
substitutes. There is relatively a low (if any) number of substitute products outside the
industry that can perform similarly to sport goods products. Customers then are compelled to
buy in this industry, leading to high switching costs. Thus, the threat of substitutes is low.
B. AMER SPORTS BACKGROUND
Founded in 1950, Amer Sports has gradually transformed from the initial tobacco trading
industry to a sports goods giant based in North America. The general business scope involves
winter outdoor sports, ball sports, and fitness-related equipment ("Amer Sports-History:
Amer Sports history", 2021). These include Arc'teryx, Salomon, and WIlson. Anta Sports
disclosed acquisition-related information in 2018 and acquired 94.98% of Amer Sports'
shares at a premium of 4.6 billion euros. After the acquisition of Anta that year, the stock
prices of Anta and Amer both rose (Liu, 2021). Net sales of Amer is found in Figure 3 (Liu,
2021).
Figure 3: Amer's 2018 revenue growth ratio
C. INTEGRATION OUTCOMES
a. Increased International Sales Growth
By acquiring Amer Sports, Anta is able to expand its overseas reach in various markets.
Amer’s geographical locations complement Anta’s hold in China given that 42% and 43% of
Amer’s sales come from the Americas and European regions respectively. These figures are
in contrast to Amer’s sales in Asia Pacific which comprises only 15% of total sales (Takala,
2019). Thus, the deal boosts Anta’s global expansion in foreign markets and aligns with its
vision of becoming a world-class multi-brand sportswear group.
b. Added Product Line Diversification
From the perspective of environmental factors, Anta's acquisition of Amer has brought a
unique winter clothing market. From the previous acquisition announcement, Anta indicated
that the acquisition of Amer is to make up for the gap in the winter market and expand the
scope of Anta's products (Zhang, 2018). Amer's market research on outdoor and winter
clothing has a historical imprint and provides a good foundation for the development of
Anta's product, giving the chance of more diversification in competing with U.S local brands.
c.
Brand awareness
The core resources that Amer gives Anta is brand awareness that Amer has built during
decades. Amer sports products are positioned as high-end consumers, consumers agree with
the value proposition transmitted by Amer sports brand, and the outstanding professional
level together with the status in sports brands. Through consumers' trust in Amer, the
awareness of Anta is enhanced. This integration enables consumers to know that Anta is not
only selling cheap products, but also a sports brand company with high-end products and
professional research on sports products, which is an essential factor to position Anta on the
same level with its biggest competitors in the U.S. market.
d. Resource integration
i. A ready-to-use supply chain
In terms of supply chain, Amer has five major regional distribution centers located in
Germany, France, Australia, the United Kingdom and the United States. The company has 12
production bases in Asia, Europe, and America. In terms of channels, Anta lacks distribution
channels to expand overseas. The global layout of production provided by Amer optimizes
Anta's industrial chain structure. This top-down value structure provides Anta with important
resources (Henderichke, 2021). Amer has 290 physical stores around the world, of which half
of them are situated in the U.S. and the company is now expanding its online stores (150
e-commerce stores).
ii.
Management and marketing skills
When discussing the U.S. market, the Chinese culture could turn out to be a challenge,
both in terms of product and in terms of marketing (Henderichke, 2021). Through continuous
research and development, Amer emphasizes consumer centered product creation. Amer
always tries to develop products from the perspective of consumers, attributed to their R&D
centers around the world. Consequently, the brand has a deeper knowledge about their
consumers and therefore aligns their new products to meet local needs. This knowledge is
what Anta does not have outside China.
iii.
Partnership with NGOs
Amer enjoys a high reputation in social responsibility. The company works with many
NGOs and associations, such as the British Columbia search and Rescue Association,
schools, youth employment college, move count, unisport, Ricky Barnes foundation. With an
increase in key partnerships, Anta gains international recognition with its networks and
collaborators, thus pursuing its strategy in expanding overseas.
4. CONCLUSION
Today, there has been an increase in outbound foreign direct investment from China.
Given its vision to expand overseas and the high competitive rivalry in China’s sportswear
industry, Anta acquired Amer Sports in the U.S. market. By making this decision, Anta
acquired the resources already present in the foreign territory instead of developing them
from the ground. To this extent, both companies integrate their resources and capabilities,
including brand reputation, foreign network, and know-how that Amer has developed over
years.
Since the buyout took place recently, in 2019, further observation is needed to judge
whether the strategy will be completely successful in the American market. However, the
researchers know that Anta has unquestionably performed vigorously in the Chinese market,
and now the company has much higher ambitions, though the acquisition of Amer can
certainly help in achieving them. In fact, it is undeniable that Amer as a sports goods giant in
North America has brought Anta a solid foundation for its future globalization layout.
In conclusion, the global development will depend mostly on how the company will
combine the acquired existing assets, how it will secure them in order to exploit the
advantages over the next few years, as well as how competitors will react to this potential
threat.
References
Amer Sports - History: Amer Sports history. (2021). Retrieved 27 May 2021, from
https://web.archive.org/web/20080331103511/http://www.amersports.com/about/in_brief/
history/
安踏体育用品有限公司. (2021). Retrieved 4 June 2021, from https://ir.anta.com/sc/financial
.php?open=r#f4https://ir.anta.com/sc/financial.php?open=r#f4
Anta Sports Products Limited. (2020). Anta annual report 2020.
https://files.services/files/394/2021/0401/20210401164502_09836587_en.pdf
Cheng, E. (2021). Retrieved 26 May 2021, from
https://www.cnbc.com/2021/01/29/chinese-consumer-spending-to-double-by-2030-morga
n-stanley-predicts.html#:~:text=By%202030%2C%20China's%20private%20consumptio
n%20is%20set%20to%20reach%20%2412.7,Chinese%20consumers%20spent%20in%20
2019.
DiMatteo, L. A. (2018). ‘Rule of law’ in China: The confrontation of formal law with
cultural norms. Cornell International Law Journal, 51(2), 391-444.
Getzoff, M. (2020, January 17). Most technologically advanced economies in the world 2020.
Global Finance. Retrieved from https://www.gfmag.com/
Hendrischke, H. (2021). IBUS6020: Enterprise Management in China, lecture 9, week 10:
Foreign Direct Investment and Outbound Direct Investment [Lecture Powerpoint Slides].
Retrieved from https://canvas.sydney.edu.au/
Hsu, S. (2021, March 3). The U.S.-China trade war is still happening. The Diplomat.
Retrieved from https://thediplomat.com/
LI-NING, ANTA, PEAK and 361: Chinese Sportswear Brands. (2021). Retrieved 26 May
2021, from https://www.highsnobiety.com/p/chinese-sportswear-brands/
Liu, N. (2021). 安踏为首财团完成Amer Sports收购要约，将进入私有化进程— 中国知
网. Retrieved 27 May 2021, from
http://www.lanxiongsports.com/posts/view/id/15004.html
Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A
Springboard perspective. Journal of International Business Studies, 38(4), 481–498.
https://doi.org/10.1057/palgrave.jibs.8400275
Ministry of Commerce P.R.C. (n.d.) Retrieved June 1, 2021, from: http://english.mofcom.
gov.cn/article/statistic/foreigninvestment/
Shao P. (2020). Research on Brand Internationalization Strategy of Anta. Retrieved from:
https://www.dpi-proceedings.com/index.php/dtem/article/view/35325/33906
Shih Y. (2020). Business Model Innovation And Evolution, a case of Anta company.
International Journal of Business. p. 300-311. Retrieved from:
https://dx.doi.org/10.20469/ijbas.6.10002-6
Takala, H. (2019). Anta investor day – Amer Sports introduction and acceleration strategy.
Retrieved from Anta website: https://ir.anta.com/pdf/Amer_2019.pdf
Wee Sile, A. (2015, December 10). Adidas takes on Nike in fight for China’s sportswear
crown. CNBC. Retrieved from https://www.cnbc.com/2015/12/10/adidas-takes-on
-nike-in-fight-for-chinas-sportswear-crown.html
Wilson. (n.d.). Retrieved June 3, 2021, from https://www.usopen.org/en_US/about/sponsors/
wilson.html
Xiao, X. (2021). China’s burgeoning fashion market: Trends and consumers. Retrieved 26
May 2021, from https://www.heuritech.com/fashion-market-china-consumer-trends/
Zhang, Z. (2021). Anta eyes acquisition of Amer. Retrieved 2 June 2021, from
https://www.chinadaily.com.cn/a/201809/13/WS5b99cc5da31033b4f4655cb9.html
Zhang T. (2019). Deal Logic Amer Sports / Anta Sports. WHU Finance department.
Retrieved from: file:///Users/zjuliar/Downloads/Deal_Logic_Amer_Sports_Anta_
Sports%20(2).pdf
Appendices
Appendix A: Analysis of Porter’s 5 Forces to Sportswear Industry and Anta in China
Appendix B: Amer’s Business Model Canvas